vWorker: A Company With “No Choice But To Be Profitable”

How can a founder who says he had “no choice but to be profitable” build one of the web’s largest marketplace of outsourcers?

Ian Ippolito is the founder of vWorker, formerly called “Rent a Coder”), a virtual employment agency that helps companies outsource projects to independent contractors.

Ian Ippolito

Ian Ippolito

vWorker

Ian Ippolito is the founder of vWorker, a virtual employment agency that helps companies outsource projects to independent contractors.

 

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Full Interview Transcript

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Here’s your program.

Hi everyone, my name is Andrew Warner, I’m the founder of Mixergy.com, home of the ambitious upstart and this is of course the website where you come to listen to entrepreneurs tell you how they built their business.

They tell you in their own words, you hear their story and the idea is that you pull out some of the best tactics, some of the best ideas and use them to build your own company and hopefully you’ll do what today’s guest is doing after you build your own success story, come back here, share your story and teach others.

The big question for this interview is, how can a founder who said he had no choice but to be profitable, how can that founder build one of the web’s largest marketplaces of outsourcers? Ian Ippolito is the founder of vWorker, many of you know this site as RentACoder, that was the former name. vWorker is a virtual employment agency that helps companies outsource projects to independent contractors. Ian, welcome.

Ian: Thank you Andrew, pleasure to be here.

Andrew: How many contractors are you guys up to now?

Ian: We are up to, I think about 200,000 now. It just keeps growing and growing.

Andrew: I’ve got someone in my audience, Max Kline who asked me to do an interview with you, he said over the years he’s spent $10,000 on your site just finding outsourcers. I know RentACoder and now it’s called vWorker is the place you go to when you’re looking for a developer, what else would someone in my audience go to your site for?

Ian: There’s a lot of other things, originally we did just focus in programmers but now it’s design, writing, there’s people that do a lot of personal assistant work, research, people who will go out and research things on the internet. Basically anything that doesn’t require someone physically being there is something that can be outsourced on the site.

Andrew: All right, I want to know how you did this and how you got a profitable, first, let me find out how big the site is. So here’s what I was able to find on the internet, Inc. magazine said 2009 revenue was $2.9 million. Max Kline who said, ‘Andrew, you’ve got to get Ian on and do an interview with you.’ He told me that he thinks your profit is $100,000 a day. What are the real numbers? $100,000 a day you’re laughing at, that’s not were you are.

Ian: No, not for profit. That would be very nice. I can’t reveal the profit numbers and things like that but I guess I can just say that it’s been very, very good to us and we’re fortunate to be in a situation where everybody wants to outsource, everyone wants to take advantage of the cost savings and all that sort of thing so it puts us in a good situation.

Andrew: More than Inc. magazine reported at this point right? Inc. magazine got their numbers directly from you?

Ian: Inc. magazine got it from us but, yes, yes.

Andrew: Since then, you guys have gone up not down, fair to say?

Ian: Yes.

Andrew: OK. How many people at the company?

Ian: OK. We have about 10 full-time employees now and about seven that are working part-time or working from home and then people that we hire on the site we got another 15 or 20 that are like our outsource force.

Andrew: OK. All right. I’m writing notes down to follow up with questions from Max Kline who asked me to do an interview with you. He had an interesting question that he wants to find out the answer to. Bob Hyler, a developer who I work with, a really good friend of mine, my mentor here at Mixergy, he found you were going to be here. He asked me to ask you some questions. I’ll get to all of those. Let’s get to the story first. What were you doing just before you got the idea to launch this business?

Ian: Well, let’s see. At that time, when I launched it was RentACoder back then, what I was was a computer consultant. I would go to different people’s companies, and I would help them create software. What was happening was I just created this little website on the side. It was called Planet Source Code. The idea now doesn’t sound like anything special, but at the time it was the first site that a lot of people would upload their source code.

To a programmer, that was really big. The source code is like the building blocks for how you create a program. If I can grab somebody else’s building blocks, their source code, all of a sudden it’s a lot easier to create my building or my program. That was just a site that took off because it was something that wasn’t available, and I remember I was getting all of these requests.

People were like, OK, Ian, you’re the webmaster of this site. Could you help me with this? I’d be like, well, maybe you could ask someone else on the site because I’m kind of busy. They’d be like, please, please. I want to pay you to do this. I’d like you to develop this. I’d like you to do this, and there were so many of these requests.

And so, I was like, this was killing me, but no I can’t. I can’t do any of this work. I’m busy. I’m busy. After turning them down, maybe the hundredth time, I was like, you know what, I think there’s an opportunity here. There’s something that’s missing in the marketplace that’s needed for these people.

Andrew: What was the business model behind that, before I continue on to the RentACoder turned vWorker story? What was the business model behind the previous site?

Ian: That one was all advertising revenue driven.

Andrew: OK. So, I would share my source code, lots of people would come on to grab it and learn from it, and along the way they’d see and hopefully click on some ads. That was the business model.

Ian: Yes. Exactly.

Andrew: All right. As Bob Hyler asked me to ask you, at the time weren’t there other competitors, and he specifically listed them. But there were others that were already online, other marketplaces for outsourcers. Why didn’t you just say, hey, go over to those sites, maybe, even earn a commission off of them or run some ads from them.

Ian: Well, part of it was actually ignorance.

Andrew: Really?

Ian: Yeah. It was. I wasn’t really aware of all of those other marketplaces. A lot of them are gone now. A whole bunch of them died in the dotcom crash, but yeah, it was ignorance at first, but then the second thing was I thought about it, and after I kind of fleshed out the idea, I did go online and look at some of the competition, but none of them had the essential qualities that I thought was necessary to make a marketplace work, which was they had to . . .

There’s a distrust between the two parties in the beginning, and there needed to be that third party that would be in between to hold the money and keep it safe, and if there was a problem to refund it back to the employer. Or if the employer was withholding it unfairly to pay the worker. None of the other sites was doing this.

Andrew: Really?

Ian: Yes.

Andrew: OK.

Ian: I was like, well, I don’t think I could really recommend these other places because they’re kind of unsafe. That was the idea, and from day one that’s what RentACoder had. Eventually, the other sites did copy that.

Andrew: I see. All right. So, you say there’s a demand for this. I don’t know of a lot of competitors, but the ones that I do know of don’t have this one key element that I’m going to use to differentiate myself which is holding the money and making sure that the customer gets the job that he paid for before I release it. What’s the first thing that you did with this idea and this insight?

Ian: I was a programmer, so I was like, let me see if I can create something. I had this really long plane trip from Italy, and I had a lot of time on my hands. So, I was just typing away on my laptop, and I was like, maybe I can kind of create a little shell of a site and walk through the process and see. It took, maybe a month or two to get that prototype to the point where it was acceptable to put it online.

And so, that’s what I did. I posted it online and said, let’s see if anyone is going to be interested in this. I actually was not expecting very much at the beginning, but surprisingly people were interested in it right away. It didn’t have a lot of traffic, but the people were putting money in and escrowing, and actually it grew a little faster than I was ready for because basically it was myself and two other employees. I already had Planet Source Code, and we were getting phone calls for customer service and arbitrations and stuff like that, much higher volume than I was expecting.

So, it was like, we’re going to have to do something here.

Andrew: All right. Let me break it down and understand it even more deeply. I want to dig into every aspect of this story so I can learn from it. A month and a half. That’s not a lot of time. That tells me that you really must have launched something lean. What was on that first product on that first Web page when you launched it? [??].

Ian: It was lean. It was just the very, very basics of what it took to post a project and then to escrow the funds and then to release it at the end. And to be honest, even a lot of the other stuff that would’ve been nice to have to make our lives a lot easier was not there. I didn’t really understand when there was refund, how that was going to work. There were no firm arbitration process, none of that. So it was just, OK, as soon as there was an arbitration, I would take it, and I’d be, OK, what are we going to do now?

Andrew: Was there any sorting or searching functionality so that I could look for a specific kind of job?

Ian: Yes, there was.

Andrew: OK.

Ian: The first version did have a search for the workers. They could search and they could browse.

Andrew: OK.

Ian: So just the very, very basics.

Andrew: OK. And you weren’t charging either side unless the money transferred hands, right?

Ian: Yes, that’s correct. Actually that’s something else that [??] was different from the competitors, because they were all charging people to subscribe.

Andrew: I see. All right. What about payment? That’s often something that takes a long time to put together. How were you able to do it so quickly?

Ian: It’s actually easier to do a lot of this now. You’ve got all these payment gateways and things like that make it pretty simple to set up. Back then, there was nothing. Let’s see, I don’t think I had credit cards. So credit cards weren’t set up until maybe a month later. That required purchasing the special software that was going to run on the server. There was no payment gateway or anything like that to be able to handle this. So I think the first one was, OK, we’ll pay by check and PayPal.

Andrew: So people were actually sending you checks?

Ian: Yes. Yes.

Andrew: OK. All right. I’m trying to put myself in your shoes or in another entrepreneur’s shoes at that situation, and it seems to make a lot of sense: launch quickly. But at the same time when we’re in that place, we think, ‘Boy, if I’ve got the money wrong, people are going to be upset. If I don’t have a refund process, people are going to be really furious. If I don’t launch properly and now this is my name on the line, I’ve got a little bit of a reputation, people aren’t going to trust me again.’ How do you get past those concerns, which are legitimate?

Ian: Yeah, they’re definitely legitimate. I think there’s a balance that has to be struck. You can’t launch too soon, because you’re going to have all those problems. And the problem is you’re probably paying money to bring customers in, and if they try it out and it’s not up to par, they’re probably never going to come back. So it has to be at the point where it’s polished, and it presents something that you are proud of.

But at the same time, I think, as an entrepreneur you just want to add and you want to add, and you have this feature and, oh, it would be so cool if you could do this, and it would be awesome if you could that. And I think as an entrepreneur you have to step back and go, ‘Is this really, really core? Yes. Yes. This would be awesome if it was there, but is this really necessary in order to launch this thing?’ So it takes a hard look at each piece of it.

Andrew: So, Ian, knowing what is core is critical. How do you figure out how that core is?

Ian: Well, in my case I put myself into the customer’s mind. Now another entrepreneur, maybe they have a bunch of customers that they can talk to or they can survey or they have a focus group. So I had to kind of just imagine what they would think, and I thought, ‘Well, if I was in the employer’s mind, what would I be scared about, and what would I need to have done for me, and what would make me feel better about that?’ And the same thing from the worker. ‘OK, what are the problems that I normally have in this situation, and then how can the site make it better?’ And I think if I can make it better than if they just found for themselves randomly, like in a chat room or something like that, then I had a good shot.

Andrew: All right. I introduced this is as a marketplace. One of the challenges that I’ve heard over and over in the hundreds of interviews that I’ve done here is that marketplaces are tough, because you have to get two groups of people who are very different from each other to come to the Website at the same time. In fact, they’re so different from each other that they need you to connect them, because they don’t operate in the same worlds and can’t happen to bump into each other. So I’d like to understand how you did that. Which side should we look at first, and talk about how you got them to decide, and then we’ll go to the other side? Shall we start with the workers or with the employers?

Ian: Either one is fine. My situation was I actually . . . When you’re approaching a marketplace, you can kind of anticipate, OK, I think there’s going to be six or seven different groups that are going to use this marketplace, and hopefully you can pick one where maybe both sides of it are a little bit similar, and that’s what I did. So I thought, well, OK, there are all these different people who could be using this but . . .

Andrew: Who are the six people who could’ve been using it? Or give me a few people, because in my mind it just seems like employers and employees, but . . .

Ian: Employer. Yes. Yes. But let me break it up into one where they’re very similar. Let’s say that I’m a programmer and I’ve already . . . I could be a programmer or I could be an employer, and I just want to outsource some of the extra work, or I don’t know how to do something and I want to outsource it. That’s very different than a person that’s an entrepreneur that’s an employer and needs to hire a programmer to create a website maybe, because they just got a business idea.

Andrew: I see. You’re right, two different people. Max Kline, I think is a developer himself. Bob Hyler is a developer himself. When they’re hiring, they’re looking for somebody to do things that they don’t have time to or don’t specifically have the expertise in that area to do it. I’m looking for somebody who’s going to understand the whole programming process and be able to take me from beginning to end. I don’t know how to do it myself.

You’re right, two different kinds of people, so you decided to go after which kind of person?

Ian: The programmers because I thought that’s easier. These two segments are similar. I can kind of bring them in at the same time with the same sort of bait.

Andrew: I see. All right. Why don’t we start with how you got the people who are going to list jobs because if there’s no jobs listed, no one is going to come on to offer to work for them. How did you get those guys, we’ll call them the employers, right?

Ian: Yeah, the employers. A bunch of things. I tried a million different things. Some worked better than others. Ultimately, at the time Google AdWords, for example, actually I think this was before Google. This was actually called Overture back then.

Andrew: This is 2001 when you launched, if I remember right?

Ian: Yes. Exactly. This was before Google had figured out, wow, we can make a lot of money from our search and kind of copied that idea from Overture. You could go into Overture, and for a very small amount of money, much, much smaller than you can now. It was around four or five cents a click back then, and you could bring in lots of traffic. It wasn’t very competitive, so that was a great source of bringing people in.

I would perfect these little ads and try to hone in and try to perfect the click throughs and all that. So, I was working through that, and that really was the thing that kicked it off. That was one of the things that worked. There were many things that didn’t work.

Andrew: What was one of the things that didn’t work?

Ian: Banner ads didn’t work, newsletter ads, text ads.

Andrew: Newsletter ads did not work.

Ian: They did not work, and I’m not saying that means it for everyone because this was back then. We run newsletter ads now, but at the time it just was not very successful.

Andrew: What about Planet Source Code? Was that a good source for you for employers?

Ian: Yes. Yes. I already had this flow of people who were asking me to do work. So every single time they were coming in, boom! I would say I have the perfect . . . I can’t do it for you myself, but here are about a thousand people who are willing to bid on this for you.

Andrew: I see. What about cross promotion, banner ads on your site, Planet Source Code?

Ian: Yeah. Definitely. It was like, hey, promoting to both parties. For the employer, hey, do you debug your code? Do you have a problem with it? Here it is, and then for the workers it was like, hey, would you like to earn some extra money? Click over here. I definitely took advantage of that.

Andrew: Did you have to give up any revenue from the site by-I guess you must have-by running your own ads?

Ian: Yeah. Definitely. It was a little bit of a gamble. I will say this. It was, maybe easier with the timing. The fact that it was 2001, that was right after the dotcom crash. To do that, maybe a year earlier would have been even more difficult because just to give you an idea, back then people didn’t really understand how much or maybe how little they should pay for advertising. They were way overpaying for advertising.

We would have big name companies on Planet Source Code, and they’d be paying 30 to 40 CPM. So, just to show a banner ad 1,000 times, 30 to 40 bucks. These were tiny little banners, too. These were little 468×60, not even like the big banners that you see today. And so, it was a very good business model, but the dotcom crash came. People couldn’t pay their bills all of a sudden.

Now, I was like, should I run this guy’s ad who’s probably not even going to pay me. It’s really questionable, but maybe I can just do something for our own business. It made it easier.

Andrew: What kind of calculation did you do about how much money you needed to earn from it for this to pay off for you?

Ian: Well, I was fortunate because I already had the most expensive thing which even today is probably not a big deal to people, but back then the bandwidth was really expensive.

Andrew: Could you host it?

Ian: Yes.

Andrew: Wow.

Ian: Exactly. Back then, basically this was before co-locations (?) and all that sort of thing was available to people. Basically, I had for Planet Source Code already I had 6T1 lines running into my house. These were the old-fashioned lines. Each one was like 1.5 megabits per second which is like nothing today. I mean, now, you have a fiber line to your house and it is no big deal, but each one of those, if I remember right, was about $1500-$2000 a month, and you rent these things out for a year from the phone company, so I already had some big expenses, but Planet Source Code fortunately was covering them, so I thought, “OK. This gives me the flexibility now that I can add on something and not have to pay the big infrastructure costs.”

Andrew: I see. Yes, you know what? We actually had a cold room back in our office in the old Bradford and Reed days, and we were already using it to run one site, and so anytime we had a new idea, the infrastructure was in place. We had the developers in-house, we had the hardware, we had the bandwidth in place so we could launch sites over and over. I guess today that is not an issue at all.

Ian: Yes, yes. You do not even think about it now, probably.

Andrew: Right. I would not even think of it as a competitive advantage: “I already have servers.” Well, who does not have servers?

Ian: Yes.

Andrew: Anyone who has a RackSpace account or an Amazon account has servers.

Ian: Exactly.

Andrew: Alright, so you are building this up. You already have that, but do you say to yourself, “If I can only get one hundred people a month to sign up, then I am profitable,” or, “If I get fifty, then I am happy.” What did you do? What kind of mental calculations did you do, and what kind of milestones did you set for yourself for success?

Ian: You know, I cannot tell you the exact numbers now, but I did exactly what you said, and I said, “Well, OK. If this number of people do it”–and I will say this, at the beginning, I was a little dismayed, because I thought, “Wow, we are just taking this little percentage. It is going to take a lot of people to go through this site to make it worth anything,” and I said, “OK. We will start small. I am just going to grow. I am going to try to get more every single month,” and that is what I did. Yes, I did set goals, and it did not reach them right away, but over time, eventually it did.

Andrew: Alright, you talked about all the things that the site did not have when you launched, because you launched within about six weeks. Of all of those things, what is the one thing that customers came back to you and said, “Hey, this is really important to us. This is what we need you to put on.”

Ian: It is hard to think of one.

Andrew: Well then tell me a few, if you do not mind.

Ian: I mean, pretty much, it is as if, even today, when the products are so mature, we get hundreds of emails from people saying, “You really have to add this and you have to add this.” It is one of those things where it could go off in so many different directions, but let me think. At that time, there were some things that were not there that we really needed to protect us that were not in place, and there were some things that they needed.

The rating system was there, but there was no protection. People could trade ratings. They were afraid of retaliatory ratings, so if I rated someone bad, they might rate me bad, so, “You know what I think I will just give them a 10.” That was a big one at the beginning, because it was like, “Hey. You know, I know I can’t rate other people honestly. How can I trust this rating system, that other people are using it?”

Andrew: How do you solve that problem? I still worry, with websites. I do not want to give negative ratings to anyone, so if I do not have anything positive to say, I just do not rate them at all.

Ian: Yes. Yes, and a lot of websites are fine with that. For us, it was really, really important, so what I came up with–I thought, “How could we protect these people?” There is a double-blind system, so in other words, what happens is, if I rate someone, they cannot see what I rate them, and if they rate me, I cannot see, and then basically, only once both have done their ratings, then all of a sudden we reveal, “OK. This is what the person rated you.”

Andrew: I see. OK, and how long did it take you to come up with that solution?

Ian: It took a while. We thought, “Well, maybe we could adjust the rating later.” We tried to come up with all sorts of things, and finally that one ended up doing the trick, but it took a while.

Andrew: Was there any point in the early days–I am talking about the first few months–where you said, “Boy, this is a bad idea,” or, “It’s just not going to work”?

Ian: Yes. Well, there were definitely moments where it was this close to complete disaster.

Andrew: Can you tell me about that? Maybe one of the first ones?

Ian: Sure. The first one I remember because I thought it was just going to wipe us out. What happened was it was maybe month two or three, and it was doing OK, and like I said, I had those goals, trying to grow the site, and all of a sudden, a big order came in. I thought, “Oh, cool, a great big order comes in.” It was kind of a fast order, which maybe should have raised my suspicions, but I thought, “I posted the project, got someone to work on it and they did it really quickly.” We get paid, and I thought, “Oh, cool. If we have more of these, things will be great.”

Then, a few days later, a piece of mail comes in from the credit card company, and they say, “OK. Guess what? This was a fraudulent credit card, and so you are going to send that money back.” I thought, “Whoa, send the money back?” I was thinking, “I have already sent the money out to this worker,” so it is $5,000 that I have given away, not even just losing our fee, but losing . . . So our fee, say it ranges from 6.5 to 15 percent, or let’s say 10 percent. So let’s say $500 would be our fee. Not only do we lose the fee on that, but now we’ve lost $4,500 in previous fees. So it’s, whoa, OK, that’s really, really uncomfortable, especially then when it’s hardly making any money.

Then the next day all of a sudden they send another letter, ‘Oh, these three are bad.’ The next day they send another letter, ‘This is bad, this is bad, this is bad.’ And all of a sudden it was, oh, wow, this looks like a complete disaster. What are going to do? We’ve got these people who steal credit cards, and they run them through on the site, and they pay themselves. So that’s how they extract money from these stolen credit cards, and how do we stop it, because the credit card companies will not protect us?

Andrew: So what do you do?

Ian: So at the time it was Zoe, my CFO and I, we were, “This is going to end our business. We’ve got to figure out something.” So we just sat down and we’re, like, “We’re going to attack this from a bunch of ways.” What we’re going to do is we’re going to create some sort of verification process.’ And what’s funny is now all the sites have a verification process, but back then there was no concept of this, so we had to build all this stuff ourselves. So it was, like, “We’re going to call every single person that goes over a certain amount. We’re going to do a little charge on their credit card to see.” So we came up with all these different ways, and to be honest, only a few of them stayed with us. We tried 10 or 11 different things, and people were not happy at first. They were, like, ‘What are you doing? You’re adding all this extra work we don’t want to go through.’ But it did stop the fraud, so . . .

Andrew: How effective were phone calls? That seems like a pretty quick and easy thing to set up when you’re in that kind of trouble. Were they effective?

Ian: Yes. Yes. It weeds out a certain type of fraud and we thought the person that’s not going to go through the trouble of creating a fake phone number that’s going to link to themselves.

Andrew: Right.

Ian: So it does, but that wasn’t enough. So we actually added in things where we’d call their bank. We’d say, “Tell us the bank on the back of your credit card. OK. We’re going to call the bank to make sure you really have that card.” All sorts of things that are just not in the standard credit card processing thing that we just had to do to protect ourselves.

Andrew: So what do you do when you’re a new company, not much money, and you suddenly lose $5,000 plus dollars? Did you have enough in the bank that you were able to cover it?

Ian: I basically had to take it from what was in Planet Source Code. So not from RentACoder. Fortunately, I had another bank account to draw on basically.

Andrew: I see.

Ian: And that’s how I covered it.

Andrew: At what point did you stop doing consulting work yourself and develop for other people?

Ian: It was probably maybe two to three years into it, I think, where I was . . .

Andrew: Two to three years into Planet Source Code [SP] or into Rent-A-Coder [SP]?

Ian: Into RentACoder.

Andrew: So on RentACoder, while you were building RentACoder, you were still a coder for rent?

Ian: I was a coder for rent. I was never actually a coder for rent on the site, because of the . . .

Andrew: Why not?

Ian: There’s a conflict of interest there, because we have to do the arbitrations. If I was the coder, I definitely could not arbitrate against myself nor could someone in my company, so we never really did that.

Andrew: I wrote a note here to come back and ask you about arbitration, because you said that’s one of the first problems that you had.

Ian: Yes.

Andrew: What kind of issues did you have with arbitration early on, and how did you deal with it? Do you have an example?

Ian: I guess the clearest example is just someone would write in and they would say, ‘Hey, I have a problem with this person,’ and deciding, OK, are they going to get their money back or is it going to go to this person? And maybe it seems like a simple thing, and it probably did to me at the time, but if you would look at the process right now, we have an arbitration manual that details every step of the process.

There’s a non-technical manual and a technical. There are over 100 pages in each one of those, and we have to in order to standardize the process and make sure that everyone does it the same way. But basically trying to come up with that process on the fly was very, very challenging.

Andrew: You have to be Solomon with everybody brand new for the first time to figure out how to do it.

Ian: Yes. Exactly.

Andrew: So how do you do it? If I were new, I’d be so desperate for the business, Ian. And I tell you what I would do, I would just take money out of my pocket and give it to both people and go, “Guys, you love me now. Do you love my new Website? Please help me grow. Tell your friends I’m a great person.” Which is obviously a terrible precedent to set. What do you do then, short of being Solomon and better than just being this wuss who gives everyone money to solve a problem because you’re such a new entrepreneur, what do you do?

Ian: I kind of had to go without the mindset that, OK, before I’m in my customer service hat, and I would do exactly what you’re thinking. Now I’m in my arbitrator hat, so I have to kind of have a different attitude, and it’s not necessarily customer service. It’s all about being fair and objective, so that was the way that I did it. And it was hard, because someone would be saying, “Hey, if you’re not going to arbitrate in my favor, I’m going to take my business elsewhere.” And so the business owner in me is, like, “Oh, this is killing me.” I just had to remember it’s, OK, that’s a different hat, you can’t do that here in arbitration. So, it was a mental shift.

Andrew: All right. Let’s see, what the next big milestone. I found out how you launched. I found out how you got both sides of the equation to come in. What do you do after that?

Ian: Oh, there were so many problems.

Andrew: The problems of arbitration, we talked about them.

Ian: OK.

Andrew: What was the next big milestone for growth?

Ian: It took so much energy. We actually switched the name and expanded into other areas, but I think one of the big things was basically the fact that we were getting a lot of arbitrations. I think at the time it was a lot, lot, like maybe, 25% of the projects were going into arbitration.

What I realized was that the business could not scale if . . . So, the expense of arbitration was expensive, and we were offering it for free and we still do. That’s something that, I’m trying to think of anyone else that offers free arbitration. I don’t think so, but I don’t think any other marketplace offers it free. That was one of our added things. It was like, we either have to start charging people for this, or we’re going to have to find a way to make sure that it doesn’t destroy us.

It was like, OK, well, maybe we can do something proactive to stop arbitrations. That was the idea. And so, I went in and I analyzed a lot of arbitrations, probably about a thousand. And I went into what went wrong, and I would categorize each one and take a look.

At the time, I had hired an arbitrator to do it. I had him go into all those arbitrations, and we categorized them, and we saw, here’s where the people are going wrong. We’re going to create a wizard at the beginning that we’re going to force them to go through, and it’s going to ask them the questions that’s going to prevent them from making these mistakes later on.

Andrew: For example?

Ian: An example is they would get into fights, a very, very common thing over like . . . So, I’m an employer and I need a website developed. I hire this worker, and I know nothing. I’m a typical entrepreneur. I don’t know anything technical. And so, I hire this worker, and this worker goes and maybe, he spends a month and he creates a site that works on his own machine. He uploads it to my hosting company and they say, “Oh, we can’t support this because he’s using a component that requires security, that you’re using a shared host.

Now, it’s like, OK, so what happens here? It’s like, on the one hand the entrepreneur is not getting what they want. They are not happy. On the other hand, the worker did everything that he was supposed to do. These are the really, really tough cases. At the beginning now we ask. We say, “Where is this hosted?”

They would fight all the time over who was going to install it. So, at the beginning, it says, “Who is going to install the work? Who is going to be responsible for it?” All these questions that people don’t think about to make sure that they don’t mistakes in the process.

Andrew: How did that impact your numbers?

Ian: Arbitrations now are down to about 9 to 10% of projects. I still though . . .

Andrew: I can’t believe it that 9 to 10% of people have frustrations with each other.

Ian: It’s actually a very good ratio for . . . The average software project is actually something like 50 to 60% failure rate. It’s just really easy to mess up software, not get it on time and things like that because it’s so complicated. I’m pretty happy with that rate.

Andrew: I’m looking here at an old article. By the way, you guys are about ten years old now, right?

Ian: Yes. This was our tenth anniversary this year.

Andrew: Before I go to this article, let me ask you this. I talk a lot of times to entrepreneurs about why they started a new company, and they often say, I was really good at that last business, but I got tired of it. Or I got ready for a new creative challenge or something.

We can’t ever create something on the scale of Google or Microsoft if every few years we get tired of it and we have to move on to something else. I’m curious. Did you have that moment? And if you did, how did you keep going through that “I’m tired of the same old thing?”

Ian: Let me answer that question, maybe to give you some personal background about me. I remember for a year trying to watch my weight, and I wanted to get it to a certain amount. I couldn’t quite figure out how to make it work, but I realized that if I ate this certain meal-it was chicken with broccoli and breakfast if I ate pancakes with this. If I ate this, I would stay on my weight. Because I couldn’t quite figure out how to make it work with other things, like I would drift off of that and I would start gaining weight, I ate that same thing for a year.

Maybe, I’m a bad example because if there’s something that works, it’s like, I will stick with it. Like everyone else, I have times where I’m like, oh, I don’t want to do this or I would like to work on something new. It helps in an area where there’s lots of possibilities, so I think about, well, OK, if I just get out . . . I don’t want to go to work on this credit card problem right now. It’s really boring, and it doesn’t bring in any money, it just stops the bleeding from happening. So I would tell myself, ‘As long as I work on this for the next two weeks I’m going to reward myself, next month I’m going to get to work on this cool new feature that I think is going to bring in all these people.’ and all these things so I kind of set up an awards system for myself to keep myself motivated.

Andrew: What I read here in this article is that you had a really lean organization, for years you kept it at, I think, around a dozen people?

Ian: Yes.

Andrew: Excuse me, half a dozen, not even a dozen people.

Ian: Yes.

Andrew: How did you get to be so big and still stay so small?

Ian: It kind of depends on your philosophy. My philosophy has always been, I want to try to keep the costs down, there are other people that want to grow as quickly as possible with the hopes of a buyout or something like that. I was just looking at one of our competitors, I didn’t realize how small we were, I knew we were smaller than them they just did an interview and they have like 150 people, I was like, ‘Whoa.’

Andrew: Versus how many people, again, do you have?

Ian: In house, maybe about 14 or 15 that are in here. Automation has been a big thing. As soon as we find a process, once we figure out how to do it, we automate it. Figure out how to do it, automate it. It’s a constant, we have new work, automate it and that has been a driving goal just to try to keep the costs down as much as possible.

Andrew: Can you tell me about something that you, actually, before I dig into automation, what else do you do to stay so lean?

Ian: In my case, for me the leanness comes from the number of employees so it’s just reducing that.

Andrew: You’re saying that if you have fewer employees then there isn’t room for overhead, there isn’t for busy work, there isn’t room for extra layers of [xx] the management . . .

Ian: All processes.

Andrew: . . . and that sort of stuff by keeping that number down.

Ian: Maybe it’s fighting a losing battle, I don’t know. There are some people that tell me that you can’t do it and you’re going to get to a point, I think they usually say around 20 employees where maybe you start to lose a little bit of control and then you’re just going to snowball. I don’t know. We’ll see what happens.

Andrew: OK. What else? One other thing that you do, if you could, that keeps the organization so lean?

Ian: I really think that’s it I guess, I wish I had more to explain but it’s basically just looking really, really hard at every single process and saying, “It would be easy to put a person in this now but let’s spend the time to invest in some way that we can automate it.”

Andrew: Can you give me an example of something that you’ve automated? This actually has been a topic that I’ve been especially fascinated by, about how entrepreneurs think about the process of their business and automate it and systemize it so that they don’t keep doing the same thing over and over and maybe have time to think of the next new project. What are some of the projects that you’ve automated?

Ian: That’s a good idea itself, I was reading a book that was talking about, do you always want to work in your business or do you want it to run like a watch where you just wind it and you let it go.

Andrew: What’s the book?

Ian: You know what? I’ll find it out for you and I’ll send it to you by email.

Andrew: OK. I’d love it.

Ian: Yeah, yeah.

Andrew: Maybe we’ll get the guy who wrote it or the woman who wrote to come on and do an interview

Ian: Yeah, yeah. It was really good about mindset. So the question was basically how do you go about doing that? An example is basically, let me think of something that was horrible. Well, the verification process actually was a horrible, horrible thing.

When we started off it was just a whole bunch of pieces of paper and we would write down, OK, here’s the person, we need to call them and then maybe the person that took the order would pass it to the person that was going to be available at the time necessary to call them, they would write it down and pass it back to the other person.

They would say, OK, it sounds good or reject it and send it to whomever so there were all these pieces of paper that were running around. One day I was like, ‘OK, this has got to stop because there’s two of you working on this now but there’s no way that this can scale to a bigger thing and it’s chewing up all your time.’

So just took back and said, ‘OK. How can we create a computer system that would automate this and make it simpler? It should actually make it faster and you guys wouldn’t have to so much work.’ And that’s what basically happened.

Andrew: You just said, “‘How do I automate it?” OK. So then what’s the first step for automation at your company, at vWorker?

Ian: Like in a particular thing or just like as a general?

Andrew: Yeah. What I found is that some entrepreneurs will say, let’s just document the process as we’re doing it now and then we’ll go through that document and look for areas that we can cut, then we’ll see if we can have a stranger do that process because if a stranger can do it then it means that we’ve documented it properly.

Then we can see if we can automate it or put systems, before we automate maybe we can put systems in place where you can’t screw up. For example, if we find that we book two sales people, excuse me, one sales person on two different sales calls way apart then it’s a problem. Why wait for the problem to happen? Let’s create a system where they can’t, where the mapping system does not allow that kind of double-booking to happen, anyway, I am trying to explain their process instead of asking you how you do it. What is your process?

Ian: Well, that actually is an awesome process. I had to go through kind of an abridged version of that because I did not have that strange person that I could bring in, the stranger or whatever, to run through the process and see if it actually worked, but I did take that mindset. I thought, “OK. I want this to run, so I am going to ask the expert”–in this case, the people that run the verifications–and the goal is I want someone who knows nothing about this to be able to do it, and so we would go and we would look at it, and the first run would never be there.

So we would say, “OK. Well this is all I do to do this,” and so I would write it down, and in this case, maybe I was a good example, since because I did not know everything about the verification, I would ask, “Well, how exactly do you tell just from calling them on the phone whether or not they are good or not?” so you reach them on the phone–what does that mean? I would ask more and more questions and dig into it and dig into it, and so we would refine it a whole bunch of times until it got to the point where I could understand it, and that was kind of the “clueless person on the street,” test, and that is the test that I would use, and if I did know something, I would try to pretend that I did not know anything.

Andrew: Just walk through it, and then when you automate it, you hire someone or one of your guys will create software that takes over from there?

Ian: Yes, exactly.

Andrew: You mentioned that there is a manual now for arbitration. What about internal manuals for getting work done and having everyone know how to get work done? You have that?

Ian: Yes, yes, those are really important.

Andrew: How did you guys create that?

Ian: Well, those are some things that with the first employee, were not really necessary, because it is like, “OK. We just have one employee.” I would just sit there and say, “OK. Well, you need to do this. You need to do this,” and tell them, but it was not scalable. Once you bring the second employee in, the first employee tells the second employee what they thought you said, and it is like that game, basically, because it is like, “OK. That really was not exactly what I said. They did not quite understand,” so what I would do is basically, I would say, “OK. This is going to take a lot of time, I know. I do not really want to spend time on this, but it has to be done,” and I would write down this is what I want you to do, and I would write down every single thing. For example–“When you answer the phone, this is how I want you to answer it: I want you to answer it with this, I want you to use this greeting, and I want you to use this tone of voice”–everything.

Andrew: How do you feel as an entrepreneur telling somebody how to do their work right down to the tone of voice? I mean, I am assuming you are the kind of person who just wants to do what you feel like doing, and here you are imposing rigorous structure that you would have fought against if you were in school or that might have kept you from having a boss. How do you reconcile those two worlds?

Ian: Well, there is a good motivation, because a lot of times I would see what would happen if they were not doing what needed to be done. For example, in that case, there was a person who was very brusque on the phone, and I even just listening to what she was saying, I was thinking, “Ooh, if I were a customer, I don’t think I would like to be talked to in that manner,” so being the business owner, it kind of puts you in a different set of shoes, and so you think, “Ooh,” you know. It kind of makes you cringe a little bit, and then I think, “OK. Sorry, guys. We are going to have to do something to stop that problem.”

Andrew: How do you get people to read a manual? Most people I find cannot read books and have no interest in reading the full article. They just want the headline. How do you get them to read and then act on what you have written in a manual?

Ian: Well, it helps that they are my employees.

Andrew: It is part of the job.

Ian: It is part of the job. Exactly. It is easy once you have employee number five through whatever, because you already have the manuals, since from day one, they come in and they start reading them. What is more difficult is before that, because while you are trying to figure out everything, you can run into that resistance, where they are kind of saying, “Hey, before, everything was like, I could do whatever I wanted and as long as I was getting my stuff done, it was no big deal, and now you are trying to impose these rules.”

So it was really important for me to explain–whenever that happened I would explain. I would not just say, “You need to do this.” I would never do that, so I would say, “Here is the problem that we are having, and this is what I want you to do, and this is how it will solve that problem,” and when you present it like that, then, you know, it is much more accepted, and then what will sometimes happen–very often, actually–they would say, “Well, why don’t you just do this?” and I would say, “Oh, that is even better. That is a great idea,” and it makes it easier for them, and it solves the problem just as well or better, so then I would get their feedback rather than just saying, “You need to do this.”

Andrew: I see. All right, let’s talk about the next group of people whom you recruited for this site. First, it was programmers who were hiring other programmers. What was the next group of people you brought in?

Ian: The next group of people were those entrepreneurs that were just starting out. I mean, just brand-new, unfamiliar with programming. A lot of them do not even have websites, just an idea of what they want done, so that was the second group, so that required changing all the marketing completely.

Andrew: Really?

Ian: Yes.

Andrew: How would you market differently?

Ian: Well, before, the typical programmers, it was kind of programmer to programmer, they’re very technical so we can describe things to them from a technical point of view and they understand it. What I found, and I didn’t know this right away because all I did was said, ‘Hey. Let’s start attracting these new people.’

So we start marketing to them, they start coming. Where before, the programmers loved the site and they thought it was fantastic, now these new people start coming and they’re like, ‘Oh, you’re site’s awful, I can’t stand it.’ This and that and I’m like, ‘What is going on?’

It actually took a little bit to understand, OK, this is just a completely different mindset these people are coming from and the site was too complicated for them, much too complicated so we had to simplify things, where we might explain things in three or four steps, we’d have had to created new marketing things where before we would say, “Look how safe we are because we have an arbitration process and we have escrowing and all this.”

It’s kind of a complicated thing to understand so we had to simplify that way down to, ‘You should use us because we have a money back guarantee.’ and then not even describe all these technical details about how things work. It really required changing a lot.

Andrew: I’ve got to say I really appreciated that when I was researching you. I wanted to understand, how are you different from your competitors, for example, and you have this page with all the different ways that you’re different and I just wasn’t ready for it. You said, “You want the top ways that we’re different from this specific company?” I said, ‘Yes’. I clicked on that, I got the quick summary . . .

Ian: Awesome.

Andrew: . . . and I said, “That explains it, now I want more.” and I clicked over and I saw all the overwhelming ways how you’re different and I said, ‘I don’t think I need that much information.’ I just quickly got an eyeful of it, I understood it and I moved on. The simplicity really helped me.

So you’re bringing in new entrepreneurs, you’re bringing them the same ways you brought in the original coders, also through pay-per-click ads on search engine, at the time it was the go to search engine?

Ian: Yes. Exactly, now it’s Google and the other one’s too as well. We also have an affiliate program which helps to bring them in as well.

Andrew: I’ve got a note to ask you about the affiliate program because what’s interesting about your site is the three big tabs are employers, workers and affiliates. Let me hold off on that and ask you about the other groups of people you brought in to do work. So you already come from a developer world, you’re a developer yourself, run a website for developers, you recruit developers to do the work, you recruit developers to hire them.

You move on and you hire entrepreneurs, that’s a small step in a different direction but when you go virtual assistants, to writers, you have to go to a different pool of people. What’s the first pool that you went to?

Ian: Let me think, it was either writing or design and they might have been about the same time basically. Yes, and they’re very different. What we found is that designers really hated the site.

Andrew: Why?

Ian: Because there were definitely things that were driving them a bit crazy and these were things that were perfectly fine to everybody else but all of a sudden . . .

Andrew: What kind of things?

Ian: A designer is obviously very aesthetically oriented, I have aesthetic idea things but I’m no designer. Layout on the site, how do you get to things? They were all perfectly fine for the programmers, in fact, we used to have a pretty complicated setup where we had all the links on the left hand side and all the links on the right hand side.

Programmers loved it because they could go to the different things. Even the early entrepreneurs loved it but the designers could not stand it and it was just overwhelming to their brain and they would see it and they practically wanted to scream. We had to redesign the site.

Andrew: You know, even to this day, I don’t know how to phrase this, I’m looking now, since you talked about the different categories and the way that people would find them, I went to the categories page and there’s what looks like clip art on there.

Ian: Yeah.

Andrew: There’s a photo of a person, not a photo, an image of a person without a face and a magnifying glass on his tie. What about the design? Why is the design the way it is?

Ian: The design has evolved over time. It’s partially driven by, what are the trends today? But it’s also not too trendy because we have competitors that change their homepage every week.

Andrew: I can actually see the AB tests as I look at their websites. Right.

Ian: Yes, yes. Exactly, they are constantly tweaking it, doing that sort of thing. When you have 150 employees you can do that. When you run it the way that I do, we have to focus on the things that are the most important and that’s one of the things just can’t. So while it doesn’t stay abreast 100% on the latest trends, because sometimes trends come and they go too, that’s the other problem and I don’t want to waste time investing on a trend that’s just going to . . .

Andrew: Like the Web 2.0 reflect the jelly looking logos.

Ian: Yes, exactly. Exactly.

Andrew: You’re saying, I have to focus on certain things. Design is never going to be our specialty. If you want design, the other sites are going to have better esthetic designs, better AB tests. We’re going to focus on what? What is your focus instead? When people come to you and say, hey, you should design this site, you say, no, we’re focused on . . .

Ian: I don’t want to say no because we actually are in a slow process. It’s constantly . . . our price set is always changing, but we don’t have the same (?). We focus more on the product, so focusing on the safety. We want to drive down our cost so we’re the lowest cost in the industry, and features. We basically want to have more features than anyone else, and we want to have better features.

Andrew: Like what? What new feature did you spend time building that others might not even think of?

Ian: I’m really excited about the two new features that are on the site. It’s only in beta right now, so it probably won’t go live until January to everyone. We do outsourcing which is what all of our competitors do. The new features are crowd sourcing and this thing we’ve kind of invented which we’ll either going to call trial sourcing or we’re going to call audition sourcing.

The problem in outsourcing is basically it’s difficult. If I’m an entrepreneur, I don’t necessarily which programmer I want to hire if I’m going to have a website designed. I can see the resume, and I can see what they did for the past, and I can see what other people rated them. But people lie on their resumes. People put links to sites that they didn’t create. Even ratings can be faked in certain ways, not as easily. A lot of times someone might get a ten rating on something that’s on a website, but it’s completely different, and they may totally screw up on my project.

What we find is that these entrepreneurs especially have a difficult time figuring out who to choose. So, what we’ve done is we’ve created this new feature, and it’s a crowd sourcing site. Basically, rather than interviewing, I’m just going to, let’s say, I want a logo design. I’m sure you’re familiar with 99designs and those sort of sites so I can do a similar thing as them, but we’re taking it a step further where the big complaint about those . . .

I use those sites, too, as part of my research is that when you are on these sites, the pricing is a fixed price. At the beginning, I’m going to pay 500 bucks for my logo. I throw it out there. Maybe, I get enough people to participate in my contest; maybe I don’t. Maybe, I’m paying too much; maybe, I’m paying not enough.

With us, the crowd sourcing is actually market-based pricing. I put out a price that I think is good, and I put that price out there, and the people that want that price are fine and they participate. And others will come in and say, you know what? No. You need to raise it to this amount if you’re going to get me to participate.

Andrew: But only one of them will get the prize.

Ian: Only one will get the prize.

Andrew: OK. For example, let’s come up with an example for Mixergy. Let’s suppose I wanted to run a new ad for my premium service. I would run the ad. I would run a listing saying I was looking for a designer to create this ad. This is the message that I wanted to have. This is the look I wanted to have. This is the website that it’ll go on to make sure that it fits within the website, and I’m offering $200 because I think that’s what it is.

Ian: Yes.

Andrew: Some group of people will compete to design, and I’m hoping one of them will win $200, but others might pop in and say, Andrew, $200 is a little cheap for the kind of thing that you’re looking for. If you bump it to $250 or even $350 you’ll going to get unbelievable design from better workers. Do you want to raise it? I raise my price, and I get even more people coming in to do the work. That’s the idea here.

Ian: Yeah. It’s basically specific people will say, if you want me to bid on it and you look at their resume, wow, this guy’s really good. Yes, I will raise it or, maybe you’ll be like, oh, well, this guy is not worth the trouble. I’m not going to raise it. You have complete control over how many people are going to participate.

Andrew: Got it. I see, and this is not a feature that your other competitors have, as far as I can tell, on their radar even.

Ian: No. They haven’t even thought about it. And the other thing is the crowd sourcing work on all types of projects. Right now, people have only figured out how to do crowd sourcing for graphics and things like that. But because of this fixed pricing and some of the other things that we’re doing, people are going to be able to do crowd source programming. They’re going to be able to do, not just small projects. They’ll build crowd source any size because we’ve got some tricks up our sleeves in order to make this work. It’ll be coming out soon.

Andrew: I hope you e-mail me. We’re not done with the interview, but I hope you will e-mail me when you come out with this. I’d love to be one of the first people to find out about it.

Ian: Oh, that would be awesome, yeah.

Andrew: By the way, that’s pretty much all I do. I go to outsourcers for everything. It’s so freakin’ helpful.

Ian: Yes.

Andrew: You need to know how to do it right. They’ve learned over time how to find the right person for me and how to set up milestones, how to do small projects where if I even suck at it the way I describe it, the person sucks and I’ll still be able to pay them and move on and feel like I’ve lost too much.

All right. I don’t want to talk about me. I want to talk more about vWorker. Affiliates, big tab. Affiliate program, basically you’re saying to the world if you send us a customer, we will give you some money. Anyone can pretty much sign up.

Ian: Yes.

Andrew: You can be as creative as you want as an affiliate to bring us customers. Why does it work for you? Why does it work so well for you?

Ian: I think part of the reason is that we’re pretty generous. The competitors are saying, hey, if you refer someone, we’ll give you a one-time thing or . . . We basically or saying I’m fine with making these people my partners. If they refer someone, they’re going to get paid for life. For as often as that person’s going to do business throughout their entire lifetime, customer lifetime, we will pay them. So I think it’s important to figure out, if you’re going to do an affiliate program, how much can you afford, and I think you should just be as generous as possible.

Andrew: I see. And this is your main marketing channel right now, affiliate programs?

Ian: It’s definitely one of the main ones, yes.

Andrew: What’s the other? Do you still do paper click ads on search engines, [??]

Ian: Exactly. And Google.

Andrew: What else?

Ian: So we’re experimenting with a whole bunch of different things, but those are the main ones.

Andrew: All right. And can I see yours actually on the affiliate page. If I were to refer an employer to you, like someone in my audience were to click over if I had an affiliate link, I’d get 20 percent of everything that they paid you.

Ian: Yeah. Yeah.

Andrew: And once I hit 1,000, I get 25%. Once I do 10,000 of business, I get 30%, almost a third of every dollar that you guys get. It’s equally generous for the worker. If I bring both a worker and employer to you and they connect, I get 40%.

Ian: Yeah. It’s a really good system, as you may refer both.

Andrew: You know, it’s really hard for me to just . . . I don’t know where this came from, but I believe in some kind of journalistic integrity, and I feel like I should not have affiliate links in the interviews and not have affiliate links in anything. But, boy, I’d love to know how many people I’m referring to you, and it would be nice if I were bringing in revenue. But, of course, just for the audience, so they know . . .

Ian: You can’t, huh?

Andrew: . . . this interview is done without any . . . I’m spending money to do this interview with you. I’m spending money on transcripts.

Ian: Wow, that’s nice.

Andrew: I’m spending money on video editing, all kinds of stuff.

Ian: It is not easy to put together something like this. I have a little clue.

Andrew: It is not easy.

Ian: A little clue, yes.

Andrew: Thanks. I appreciate you appreciating that. I think some people think that we just kind of come on here and we chat. They don’t realize there’s a little bit of research that goes into it and all the editing and everything else. All right. I don’t mean to cry; I just want to ask this: What are two things that you’ve learned about doing an affiliate program right that has made yours work? You told me about generosity, but two others.

Ian: Yes.

Andrew: If someone in my audience says, “I’ve got to try an affiliate program, I want to learn from Ian,” what would you tell them?

Ian: I’m trying to think of maybe some of the mistakes that I made, and maybe that will give me an idea on the affiliate program. I guess complaints that we had were . . . So the first complaint was not enough money, so we already dealt with that. Second complaint, you need to offer a lot of tools. I don’t know if this applies necessarily, because in order to be as generous as we are, we can’t have middle men, so a lot of people will just contact . . .

They’ll have a third party affiliate program. They’ll plug it in, and that company will get a percentage, and so will the end affiliate. So in order to make it that generous, I remove those people. But as a result, the tools were not as good as they needed to be, and the affiliates couldn’t track everything. So there was a lot of work that had to go in to make sure that the affiliates could see everything, could categorize, and could make sure that their results were good. So I don’t know if that helps the typical person.

Andrew: What do you mean by categorize? I can see how knowing numbers quickly helps affiliates decide whether the ads they ran for you are effective or not and tweaking them based on the results. But categorization I haven’t heard about. What do you mean?

Ian: So maybe I’m an affiliate and I’m doing four types of tests, so I need a little tracking on the back end. OK, test number one made me this much. Test number two made me this. So that sort of thing.

Andrew: I see. Wow. Now you’re making me second guess my whole policy of no affiliate programs. I’m thinking I should do an e-mail afterwards, and say, “Guys, you’re already using RentACoder, or if you’re not, you should be.”

Ian: Just jump on, yeah.

Andrew: vWorker. Hey, the name change. Why the name change?

Ian: What happened was the name RentACoder was very well known, it had a lot of branding behind it. What happened was it was limiting us, because we were actually already starting to get all this work in writing, in design, and all these other things, and these people would come on the site, and it was two things. So it was other people seeing us in a certain way, and they would be, “Oh, RentACoder. I’m not going to hire a writer from there. I’m not going to hire a designer. They’re probably not very good.”

And the other thing was actually a mental thing from my point of view and internally here. We would always talk about, OK, coders and programmers, and when you get into that kind of mental rut, that’s when you don’t realize things. We didn’t realize that our site is offensive to designers. We didn’t realize these things, because you’re always thinking programmer, programmer, programmer. By doing that it served both purposes and that was the reason.

Andrew: I see. How far back did you change your name?

Ian: It was not that long ago. It was maybe two years ago.

Andrew: What was the roughest part?

Ian: It was reprogramming the entire site. It doesn’t seem difficult, but basically all the references to the programmer does this, or the coder does this and every single email had to be changed. That process took months just to convert the site and then of course then you have to change all your stationery and all that sort of stuff, new signs and everything, but it was well worth it.

Andrew: Are you pretty much done with the transition now?

Ian: Yes, done with the transition.

Andrew: Revenues never went down, did they?

Ian: No they didn’t go down. What we found that was interesting is then all of a sudden people in the press started noticing where before they didn’t really care. Programmers, coders, but now they were like, virtual workers? What are those?

Andrew: Virtual workers, that’s a hot area right now.

Ian: Yes, yes, it definitely is.

Andrew: All right. One thing that I kept noticing about you is that you like to learn a lot. You talked about how reading one book, that you’ll send me the name of the book later on opened your eyes to a new way of doing business, automation specifically and I’ve noticed you reference what you’ve learned throughout. What are you learning? Tell me about that. You’re nodding, tell me about the importance you place on it, how you do it?

Ian: Yeah. I think you have to learn. I think the two most important things as an entrepreneur is you have to be persistent and you have to be flexible and adapt. The problem is, I’m just a human being just like all of us, and we only have a limited amount of knowledge, so I want to take advantage of all the knowledge that’s gone on before me and maybe I can use that to eliminate problems and obstacles that I run into. I just read constantly. I can see in the background there you’ve got a ton of books back there.

Andrew: Yeah.

Ian: And I think you’re the same as I am where I just read. I’ll just go through these books and just take all the ideas that I possibly can and try to integrate them in.

Andrew: For a long time I actually used to hide the books. I would bring my computer this way and that way the books were out of shot. I tried not to talk about learning in the interviews because I felt that that was a little boring. I’m noticing more and more that the entrepreneurs who I interview are all lovers of education. They just want to find out more. They want to find out their faults. They want to find out about negative feedback. They want to improve. They want to learn new ideas.

I just keep emphasizing it and now I’m proud to say that Mixergy is about learning from proven entrepreneurs, learning from their experiences. By the way, one of the books that I have here is The Diamond Cutter, there it is, which I was given by two premium members and I should do a quick plug for the premium membership. The premium members who sent this to me, who gave it to me, they took me out to brunch recently, me and my wife, and [??] talked about how much they loved to learn, how much value they got out of the Mixergy Premium program.

They specifically said, Andrew, we signed up for the premium program. We took lots of courses, but the one course on copy-writing helped, they said, increase their conversions from some clicks on their emails from 2%, that’s what they were getting before they took the course, to 27% just by applying what they learned in that one course taught by Dane Maxwell, an entrepreneur who happens to be really good at copywriting. If you’re a premium member you can take that course, you can take the courses on automation.

I’m fascinated by how entrepreneurs systemize. Take those courses and so many others. We have several courses on how to build iPhone apps, using outsource workers. There are some mistakes you want to avoid. What else do we have? How to find customers. They’re all in there. If you’re a premium member don’t even ask if you need to pay. It’s yours, it’s part of your program. If you’re not I hope you go to mixergy.com/premium and join so that you can learn the way that [??] and [??] did and so many others. Do I have any other names here of people? No.

I’ll have others to mention in the next program. It’s mixergy.com/premium. I keep giving the exact URL because I still see where the orders come from. They come from people going to Google, typing in Mixergy premium and then they come to the premium page and they buy, so skip Google, go directly to the page.

All right. Here’s the final question that I’ve got for your Ian. It comes from Max Kline. He asked me to do an interview with you and he said, one of the things that I’d like to learn is, ask him why he still sells Windows 3.x software even though vWorkers makes over $100,000 profit per day. We know the $100,000 per day is not exactly accurate, maybe he’s exaggerating in this tweet, but he’s specifically pointing me to Exhedra.com, some software that you sell. Tell me why do you still sell, and tell him, why are you still selling Windows 3.x software?

Ian: Well, to be honest we don’t sell a lot of that Windows 3.1 software. That is kind of a relic that’s out there. In the past, back when I was a consultant, I had [??] source code and I had all this shareware. Shareware was a great business.

Andrew: Shareware. Where you give it away for free and when people want more features they pay or if they love you then they pay. This is before freemium existed, there was shareware.

Ian: Exactly. Exactly. It was a fantastic model. You do the programming or if you’re an entrepreneur you create what the program wants and then you just keep getting the checks and that’s exactly what happened. I had a number of products back then that would do this. To be honest they’re just sitting out there on the site and with V-Worker, I don’t have the time to spend upgrading those, so that’s basically what’s going on there.

Andrew: So they’re there, you built it before.

Ian: They’re there.

Andrew: Customers are still buying, but it’s not your main business.

Ian: Not the focus at all. Exactly.

Andrew: I see. It’s kind of cool though that software still exists even after you’ve move on to other things and people are still benefiting from it and of course still buying it.

Ian: That’s true.

Andrew: All right. I think that’s pretty much it. No, I’ve got one other. I’m trying to think whether I should ask it or not, but here’s your last question.

Ian: All right.

Andrew: I did some research on you. I’m a little intimidated. The website looks like it’s for coders. The coders in my audience are going to expect a high quality interview. They know your business much better than I do, which really puts me in an intimidating spot because they have been customers of yours for a really long time. Then I Googled you and I found vacation videos. First of all, I saw pictures of you with your shirt off on some vacation and I thought this guy’s really fit. Then I saw somehow a recipe for food or a menu and you kind of described it here, and then I saw the guy loves to travel. Tell me about the traveling you’ve been doing?

Ian: Oh I do love to travel. That’s probably one of my favorite pastimes, trying new foods and traveling. I just got married, I got married in April.

Andrew: I saw that. The two of you both look very fit together.

Ian: Thank you. Thank you.

Andrew: Congratulations.

Ian: Thank you very much. We went to Greece and I had never been, so we went to Santorini, which was just the most beautiful island. As you’re pulling in on the ferry to Santorini, I remember I was looking at this huge black volcano coming out of the blue water and up at the top it looked like snow, and as we pulled in a little bit closer it was like, oh no, that’s not snow, those are houses up at the top. They are just draped up at the top and I was like, what’s going to happen next? We go in, next we’re going up to those houses, we’re winding our way up the cliff trying to make our way up to the houses and finally we’re up to the top and the view was just incredible. I had a great time.

Andrew: Is that the best part of having a business that runs like a clock, being able to take these kinds of trips?

Ian: Yes. Yes. I definitely agree with that. It helps to be able to create it like a clock and have people in place that are going to supervise so that you don’t have to do all the work yourself.

Andrew: Well it’s an inspiring story. I appreciate you coming here and going this. I asked you before the interview what are you looking for out of this interview and you said, nothing, I just want to share my story with other entrepreneurs. We know already that many of the people in my audience are customers of yours, so you’re not going to win much more business and we know that I’m not getting an affiliate revenue so you’re not recruiting an affiliate.

You just came here to just share your story and I really appreciate that. One of things I love about this space is we have this culture of entrepreneurs who build something incredible coming back and helping others do it. Sometimes two entrepreneurs who built something incredible will watch each other. I know that there are many who’ve already built successful companies watch each other, learn from each other and then go build something even more incredible and I appreciate you being a part of this mission and helping me grow it by doing this interview and sharing your story.

Ian: It’s my pleasure.

Andrew: All right. Thank you all for watching. The website of course is vworker.com. If you’re not hiring a virtual worker, I’m not even plugging Ian’s website, you’ve got to, at least try it. I’m telling you it is such a good life when you get to work with people externally who do good work and when you get this idea in your head and you go I’m not a programmer, I’m not a writer, how do I do it? When you go out there and you find someone who can do it for you it feels so liberating. All right. That’s my Evangelical rant there, vworker.com. Ian, thank you for doing this interview.

Ian: Thank you.


  • Another very good interview. I think you should bring on some more younger entrepreneurs such as llya lichestien. Awesome, hopefully you’l be interviewing me in the next 2 years. :)

    http://bit.ly/s12GGw

  • Elise

    Excellent interview, Andrew, extremely in-depth and interesting!!

  • Thanks Andrew and Ian. This is a very informative interview, especially for programmers like me.

    It seems that vWorker is a better brand, rentacoder is kind of associated with the cheap image these days.

  • Tony Henrich

    I have used rentacoder (now vWorker) a few times and there’s one thing I don’t like about a feature in their service. One time I accepted a bid where the worker was going to add some feature to an existing product I have. I gave him the source code. After 24 hours he canceled on me. rentacoder has this feature where the coder can cancel within 48 hours, I think that’s their grace period, without penalties or giving a reason. The problem is that rentacoder removes the facility to contact the coder. I couldn’t find out from the coder why he canceled and try to resolve the issue.  I was pissed off at both the coder and rentacoder.

    Here are my tips:
    1- Never accept a bid from a coder who doesn’t have any ratings, even if their bid is lower. If they end up doing a bad job and getting a low rating and feedback, they can just open a new account and start again.

    2- Don’t give source code before 48 hours, or whatever the grace period for the coder, ends.

  • Bholland007a

    Another outstanding interview Andrew! I made my first bid this week to create a website for small business in the golf industry, the individual is an inventor, professional teacher, and author. With 30 years of IT experience (Mainframe Banking/IBMer) what might be called the old Silo days, as an Senior Administrator in Content Management thought I’d create a business model and parlay/test the project management and web development. It’s exciting to see young entrepreneurs as yourself and  Ian using your intelligence and skills to create success. 

    Hopefully you young entrepreneurs will leave us mature (old) street fighters ( I walked away from it all few year ago to live the dream of learning and teaching martial arts) some gold in them there hills or should I say cloud.

    I most definitely will put the vWorker at the top of our list of sources when looking for professionals and assured that they know Mixergy is where I found them. I recommend Mixergy to all my new partners and customers as appropriate.

  • Z_delu

    Hopefully you younger entrepreneurs.i will put the vworker at the top of our list.

  • Thanks for the recommendations!

    Where are you teaching?

  • Thanks for the tips, Tony. Very helpful.

  • Thanks. Good movie selection, by the way.

  • Thanks! Glad it helped.

  • I’ve heard good things about the work people get on vWorker.

    I trust Max Klein’s opinion and he has gotten good quality from them. You can ask him here: http://twitter.com/#!/maxklein

  • Bholland007a

    JKD/PFS as used to be called. Ops where …. North of Chicago …. This is my teacher / teacher. There site is:
    http://www.fighting.net/.

    The Enigma 
    http://youtu.be/yiWU2Vi0wGU

    Another new page maybe needed – here we go with the affiliate programs again. LOL.

    Andrew here a book you will love. I have one of your course at the moment the “Raising Capital Course” you had question with Ross about the detail on frame setting. 

    Book Title:
    Frame-Games
    http://www.scribd.com/doc/61869319/Frame-Games 

    Dr. Halls is work is great, many of the leader in the NLP… with Ross different issue. Best of luck.

  • Docsta

    I listened to the podcast of this show before I saw the video and, yet again, it’s amazing how in my head a person’s voice totally doesn’t match their physical appearance! For the longest while I was trying to figure out who Ian sounded like. It came to me at the end – Seinfeld!

    Great interview from both parties, and it’s really interesting to hear the story behind sites that I’ve known, visited and used many times over the years. Thanks for all your efforts Ian.

    Andrew, did you ever get the title of that book that Ian was talking about?

  • 2 Things:

    1. Dude, for some reason, listening to his voice on this interview put me at ease. I can’t really explain it, but I felt like I was listening to a very genuine person. Anyways . . .

    2. Andrew, I seriously think you should consider including Affiliate links in your interview show notes. Just hear me out here . . . A lot of us have been listening to your interviews for a long time, and we kind of have a vested interest in the Success of Mixergy.

    As entrepreneurs, we know that in order to continue doing awesome things and offer even more great things in the future, you have to make money, and quite frankly, the more you make, the better. 

    You’ve already proven to us that you are someone we can trust. If I’m going to be using the services you feature on your site, I would rather you receive a commission, because you are the one who exposed me to it, and it just seems right. 

    It doesn’t cost us anything, and we know that it helps Mixergy to advance. Quite frankly, it’s must less “pushy” than listening to you talk about your sponsors (not that I have a problem with it – just using it as a comparison).

    I’m sure that there are many others who feel the same way. You’re just leaving so much money on the table. Anyways, just wanted to add my two cents :)

  • Thanks Leslie. Coming from you, I really have to take it seriously. I’ll consider it.

  • Richard Lucas

    I m betting it was The E Myth… reviewed here
    http://sivers.org/book/EMythRevisited
    on TEDster Derek Sivers blog

    It’s so important to think in terms of processes. If you are run by Coders IT guys its easy…. for other start up companies it is not always so easy to know how to automate, but there is still the need for a “this is how we do it” wiki blog or intranet.

    I’m sending this interview to the knowledge and training documentation for my latest start up

  • Rod Smith

    Tony, my name is Rod Smith and I am a facilitator at vWorker. I came across your posting and wanted to address a few things you mentioned.

    We offer workers a 24 hour grace period to cancel a project for several reasons, including:
     
    • The employer may not release the entire set of requirements until after funds have been escrowed, and the worker may only then realize that they cannot complete the work according to the requirements.

       • The employer may not release the source files until after funds have been escrowed, and the worker may find that the source files are too difficult to work with (since they were coded by someone else).

       • The worker may be awarded more projects than they can handle at once, so they are asked to cancel those projects they know in advance that they will not be able to complete in time.

       • The worker may be busy with personal matters and is unable to work on the project at that time.

    So workers are given this grace period as a way to cancel the project neutrally and allow the employer to select another worker. We understand that it may inconvenience the employer at times, but we think it’s more beneficial to allow the worker to pull out of the project immediately, than to wait until the deadline expires.

    In regards to removing the facility to contact the worker, communication on the project does stop once the project is cancelled. However, both parties are given each other’s email addresses in case you wish to continue communicating to resolve any issues. Additionally, you can always reactivate the project to continue communicating with the worker to find out why they cancelled using the grace period. If you’re able to overcome the issues and the worker agrees to continue working, you can always re-accept the worker’s bid.

    Finally, in response to your tips:

    1) Please note that workers are not allowed to create multiple accounts to hide poor ratings or feedback. We have various mechanisms for detecting multiple accounts, and if any user (either an employer or worker) is found to have done this, all of their accounts will be permanently closed. Workers may also risk forfeiting funds in their accounts, as they will be returned back to the employers who released them.

    2) You are actually required to release the source files to the worker as soon as funds have been escrowed, if your project requires the worker to use previous source files. This allows the worker to fully review the requirements and all files needed to work on the project within the 24 hour grace period. If a worker determines the source files are too difficult to work with, they are allowed to cancel using the grace period.

    If you are concerned with releasing the source files to the worker, you can always require the worker to sign a Non-Disclosure Agreement before releasing any information to them. This will not only protect the copyrights to your files, but also your ideas and other intellectual property.

    Please note that if you do delay releasing the source files (or any other information the worker requires to complete the project), the worker may be owed additional time to complete the project, should you allege that they missed the deadline. The worker may be given back the time in the deadline due to the delay on your part.

    Rod Smith
    vWorker.com

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